Facebook Stock Tumbles as User and Sales Growth Slows After Scandals

For months, the social network has weathered a series of scandals — including Russian misuse of the platform to interfere in the 2016 American presidential campaign and the harvesting of its users’ data through the political consulting firm Cambridge Analytica — with hardly any effect to its business. Facebook has continued to post healthy double-digit increases in revenue and profit every quarter.

But on Wednesday, it showed some of the first signs of wear and tear from the months of scrutiny.

The Silicon Valley company reported a 42 percent increase in revenue and a 31 percent jump in profits for its second quarter, compared with a year earlier. But the results, which would be robust for most companies, were accompanied by decelerating growth in sales and Facebook’s slowest growth since 2011 in the number of its users.

The numbers were compounded by comments from Facebook’s top executives. On a conference call to discuss earnings, the chief executive, Mark Zuckerberg, said profits would most likely take a further hit because the company planned to spend more on security. And the chief financial officer, David Wehner, said revenue growth would substantially decline for the rest of the year, partly because the company planned to give users more options with their privacy settings, which would let them limit the kinds of ads they saw.

The results and commentary sent Facebook’s stock tumbling more than 23 percent in after-hours trading, erasing more than $120 billion in market value in less than two hours.

Some Wall Street analysts said the various issues Facebook faced were bound to have an impact on its business.

“It should not be surprising that there was some impact from Cambridge Analytica,” said Brian Wieser, an analyst at Pivotal Research. “To explain that there is a couple million people who chose not to continue using Facebook is unsurprising.”

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Capmocracy

Capmocracy | noun | cap·moc·ra·cy - (2012 MD)
A government ruled by special interest groups. A government in which the majority of power is held in special interest groups and exercised by elected officials directly or indirectly through a system of representation usually involving periodically held elections.